Question

Calculate goodwill by capitalising the super profit: (2)

Partners’ capital Account: P – Rs 90,000, Q- Rs 80,000 and R-Rs 70,000.

Partners’ Current Accounts: P – Rs 10,000, Q –Rs 8,000 and R- Rs 5,000 (Dr.)

General Reserve Rs 60,000.

Goodwill appearing in the books- Rs 12,000.

Investments Rs 25,000.

Normal Expected Returns 12%.

Average profits Rs 30,000.​

Answer 1

Answer:

Working Note:

Calculation of hidden goodwill:

Total Capital of the firm after admission= 50000+50000+80000+40000

= 220000

Total capital of the firm based on Z's capital= 80000 * 4/1

= 320000

Hidden goodwill= 320000-220000= 100000

Z's share of Goodwill= 100000 * 1/4= 25000

JOURNAL

1. Cash a/c..... Dr. 80000

To Z's Capital a/c 80000

(Being capital brought in by Z)

2. Z's Capital a/c... Dr. 25000

To X's Capital a/c 12500

To Y's Capital a/c 12500

(Being Z's share of goodwill distributed among the partners in the ratio of 1:1)